ASIA - Emerging Asian economies are likely to spearhead the next phase in the recovery of the global real estate markets, according to Prupim, the real estate division of UK life assurer Prudential.
In its latest International Real Estate Perspective report, the global investor forecast that greater global economic stability would bolster optimism about commercial real estate investment performance in a number of specific markets and sectors in Asia.
It predicted there would be a recovery in occupier demand in a number of Asian markets, underpinned by improving intra-regional economic growth prospects.
"The worst of the commercial property downturn in Asia Pacific has now passed, replaced by a rebound in asset prices of sufficient magnitude to raise concerns about overheating in a few markets," said Paul McNamara, head of research at Prupim.
"However, the long-term outlook for the region remains intact and increasing numbers of investors believe that now is an opportune time to tap into market recovery."
Prupim also concluded that "the worst was over" for the majority of real estate markets in the world, although they have generally lagged the UK's sudden recovery.
"We predict a slow recovery for the market globally but with some marked divergences in pricing and leasing dynamics around the world," McNamara said.
"Global property yields have stabilised across a number of markets and strong yield compression has returned in China, the UK and a handful of sectors in selective European and Asian cities.
"Next year will see good opportunities to buy selectively in more recovering markets, and, possibly, in yet others where pricing has still to reach its bottom ahead of more sustained recoveries in 2011."
Prupim expected investors to remain selective in the European investment markets, avoiding secondary assets in weaker economies such as Ireland and Spain.
However, the report said core markets were benefiting from an upsurge in investor interest, and widespread yield stabilisation was evident.
"In Europe ,prime yields in core markets are expected to peak this year before compression and eventually rental growth returns," continued McNamara.
"Competition for the safest of assets in the best locations is already increasing and will play an increasing part in investment market dynamics in 2010 and beyond," he added.
The report warned of further rental declines in North America, but concluded that restrained development in recent years meant the cycle could be shallower than otherwise.
"The outlook is bleak for tenant demand in the short-term but we seem to be approaching price stabilisation in the US and Canada after large falls in values in 2009," said McNamara.